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Some investors may wonder about the differences between leveraged and inverse products (L&I Products) and exchange-traded funds (ETFs). Both L&I Products and ETFs are index-tracking in nature, but they are different in many respects.

Understanding the difference between leveraged products, inverse products and ETFs will help you identify suitable investment products that meet your investment objectives and risk appetite.

 Leveraged productsInverse productsETF
Investment objective Seek the daily return equivalent to a multiple of the underlying index return Seek the opposite of the daily return of the underlying index Replicate/mirror the performance of the underlying index
Use of leverage Yes, leverage factor capped at two times in Hong Kong No, leverage factor capped at one time in Hong Kong No, leverage factor is not applicable
Rebalancing frequency Daily Daily Depends on the index methodology
Target investors Sophisticated trading-oriented investors Sophisticated trading-oriented investors General investors
Investment holding period Short term (not intended for holding longer than one day) Short term (not intended for holding longer than one day) Long term
Termination As and when determined by the product issuer

Must be terminated if all market makers have resigned
As and when determined by the product issuer

Must be terminated if all market makers have resigned
As and when determined by the product issuer